In the span of less than one week in late September, the United States Department of Health and Human Services Office of the Inspector General (HHS OIG) issued three Advisory Opinions. The subjects addressed ranged from administrative services for radiology centers to discounts on deductibles for network hospitals to motivational incentives for outpatient substance abuse treatment centers. Each opinion analyzed the Anti-Kickback Statute; two of them discussed the civil monetary penalties (CMP) provision. All three opinions were ultimately favorable to the requesting parties. Brief summaries of these Advisory Opinions are set forth below.

Advisory Opinion 08-12
Advisory Opinion 08-12 was issued on September 19, 2008. In it, HHS OIG concluded that providing purely administrative services consisting of the processing and submitting of insurance preauthorizations for certain radiology and imaging procedures would not generate prohibited remuneration under the Anti-Kickback Statue. Nor would it constitute grounds for the imposition of administrative sanctions.

Under the proposed arrangement, the requestor would form and wholly own a new legal entity (Newco). Newco would contract with various radiology and imaging centers across the U.S. (Centers) and would process and submit insurance preauthorizations for certain procedures whenever a patient’s insurer required such preauthorization. Each Center would provide Newco with the patient information required to obtain a preauthorization. The Center would then pay Newco a “per service” flat fee, based upon fair market value, for each preauthorization processed and submitted, regardless of whether the patient’s insurer ultimately granted the preauthorization.

Notably, the requestor, along with Newco and its affiliates, did not and would not have any other direct or indirect financial relationship with the Centers or their affiliates. Furthermore, neither the requestor, Newco nor their affiliates would be: (i) a health care provider, practitioner or supplier; (ii) in any other way affiliated with the health care industry; (iii) in a position to receive or influence referrals of items or services covered under the federal health care program; or (iv) in contact with private payor or federal health care program beneficiaries in the performance of their businesses.

HHS OIG indicated that the safe harbor for personal services and management contracts would potentially apply to the proposed arrangement. However, because Newco would be paid on a per service basis, the aggregate compensation would not be set in advance and the arrangement would therefore fall outside of the safe harbor. Based on the following factors, HHS OIG found that the proposed arrangement would not result in referrals of federal health care business:

• The requestor, Newco and their affiliates are not health care providers, practitioners or suppliers or in any way affiliated with the health care industry. The services provided by Newco would be purely administrative, provided at fair market value, and Newco would not be in a position to receive or influence referrals.
• The proposed arrangement is distinguishable from other marketing or promotion services because the services are purely administrative. The requestor, Newco and their affiliates would not have contacts with patients or anyone other than the Centers. The services, therefore, do not rise to the level of arranging for or recommending purchasing, leasing or ordering items or services payable under a federal health care program.
• The proposed arrangement is distinguishable from potentially problematic arrangements where administrative services are provided by or on behalf of a supplier, such as an imaging company or a manufacturer, to an existing or potential referral source. HHS OIG specifically stated that in the problematic arrangements referred to above there is a significant risk that at least one purpose of providing the services is to influence referrals to the party providing the services.
  

HHS OIG concluded by stating that if a Center or other third party paid Newco to provide the services for or on behalf of a referral source, such as a physician, and thus relieved the referral source of the costs of processing and submitting preauthorizations, then the Center could be providing prohibited remuneration to the referral source in violation of the Anti-Kickback Statute.

Advisory Opinion 08-13
Advisory Opinion 08-13 was issued on September 23, 2008. In it, HHS OIG found that a proposed arrangement in which Medicare supplemental health insurance (Medigap) insurers obtained discounts on Medicare inpatient deductibles would not constitute grounds for the imposition of civil monetary penalties and would not result in Anti-Kickback Statute sanctions.

The requestors of the Advisory Opinion were subsidiaries of insurance companies that provide Medigap policies nationwide. These subsidiaries participate in an arrangement with a managed care organization that contracts with hospitals throughout the nation. Under these contracts, the requestors’ policyholders receive inpatient deductible discounts of up to 100% at hospitals in the managed care organizations network. If these deductibles were not discounted, they would be covered by the requestors’ Medigap plans. If a policyholder is admitted to a non-network hospital, the requestors pay the full hospital deductible, as provided under the policies. The discounts apply only to Medicare Part A hospital services deductibles. The hospitals provide no further benefit to the requestors or their policyholders under the contract. If discounts at network hospitals on inpatient deductibles are received, the requestors return a portion of the savings back to the policyholders in the form of a $100 credit against their next renewal premium.

HHS OIG found that the discounts offered on inpatient deductibles implicate the Anti-Kickback Statute (as remuneration for selecting network hospitals), and the civil monetary prohibition (CMP) on inducements to beneficiaries of a federal healthcare program. Despite the implications, HHS OIG found that the discounts offered on deductibles presented a low risk of fraud or abuse for the following reasons:

• The waivers will not increase or affect per-service Medicare payments.
• Such discounts would not increase utilization of services.
• Competition among hospitals would not be unfairly affected by the arrangement, because network membership is open to any accredited Medicare certified hospital that meets applicable state laws.
• Professional medical judgment is unlikely to be affected, since the patients’ physicians receive no remuneration from the arrangement, and the patient remains free to go to any hospital without incurring additional expense.
  

The premium credits provided to beneficiaries also implicate the Anti-Kickback Statute, and the facts listed above also apply. However, the CMP prohibition on inducements to beneficiaries is also implicated. The statutory exception for differentials in co-insurance and deductible amounts as part of a benefit plan design permits different cost sharing amounts so long as the differential has been properly disclosed to affected parties and otherwise meets all correspondent regulations. HHS OIG opined that “while it is not technically a differential in a co-insurance or deductible amount, the premium credit will have substantially the same purpose and effect.”

HHS OIG concluded its analysis with remarks to the effect that the arrangement with the hospitals has the potential to lower Medigap costs for the requestors’ policyholders who select network hospitals without increasing costs for those who do not. Thus, HHS OIG found that the totality of circumstances pointed to only a low risk of fraud and abuse, and the potential for significant savings for beneficiaries. HHS OIG therefore declared that it would not impose administrative sanctions on the requestor under either the Anti-Kickback Statute or the CMP.

Advisory Opinion 08-14
Advisory Opinion No. 08-14 was issued on September 24, 2008. The requestor was a not-for-profit 501(c)(3) organization that provides outpatient treatment services for substance abusers. Patients receiving treatment from the requestor are often federal healthcare program beneficiaries, and such programs cover much of the treatment costs. After entering in a course of treatment plan with its substance abuse patients, the requestor’s clinicians sometimes recommend introducing motivational incentives into the patient’s care. Motivational incentives may include gift certificates to grocery stores, food outlets or gas stations, or other gift items in amounts ranging from $5 to $10 per certificate, not to exceed $200 per month in the aggregate. These motivational incentives are meant to help patients overcome difficulty with achieving substance abuse abstinence, or with in attendance and participation in various treatment plan activities. The incentives have been promoted by various government entities, including the National Institute on Drug Abuse (NIDA) and the Substance Abuse Mental Health Service Administration’s (SAMHSA) Center for Substance Abuse Treatment. Research from these organizations has shown that the motivational incentives have a legitimate place in substance abuse treatment.

HHS OIG found that providing the substance abuse patients with motivational incentives, implicates both the CMP prohibiting beneficiary inducement to federal healthcare program beneficiaries, and the Anti-Kickback Statute. HHS OIG expressed concern that the availability of “giveaways” in connection with Medicare and Medicaid providers should be restricted when possible. It noted Congress’ concern that such programs could potentially corrupt the decision making process in potential overutilization, increased costs or inappropriate medical choices; potentially harm competing providers and suppliers who cannot or will not offer such incentives; and could negatively affect the quality of care given to beneficiaries by offering increasingly valuable goods or services as an incentive to offset the quality of services provided.

Despite noting these concerns, HHS OIG concluded that the motivational incentive program, if operated as certified by the requestor, posed a low risk of fraud and abuse for the following reasons:

• The requestor’s program follows the therapeutic guidelines and training curricula consistent with findings by NIDA and SAMHSA. Based on government research, the motivation incentives are integral to clinical care provided to certain substance abuse patients.
• The motivational incentives never took the form of cash and were of arguably nominal value.
• The aggregate amount of motivational incentives is not expected to exceed $200 per month, and would last no more than three months.
• The motivational incentives are only introduced into a patient’s treatment plan on the basis of clinical determination that such incentives are indicated for the particular patient’s treatment.
• Patients must “earn” the motivational incentives through verifiable participation in core elements of the patient’s treatment plan, such as providing drug free urine samples and attending all treatment plan sessions.
• The motivational incentives by the requestor are not advertised, nor are their potential use discussed with new patients.
  

HHS OIG determined that the requestor provides motivational incentives only when medically necessary and appropriate after a clinical determination that they are effective treatment for the individual patient. Thus, HHS OIG concluded that in this particular context, motivational incentives would not be an impermissible inducement to obtain services under the CMP. Further, though the motivational incentive program implicates the Anti-Kickback Statute, no administrative sanctions would be imposed on this particular program.

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This alert has been prepared by Hinshaw & Culbertson LLP to provide information on recent legal developments of interest to our readers. It is not intended to provide legal advice for a specific situation or to create an attorney-client relationship.

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